IRS Foreign Tax Credit Denial Leads to Court Challenge
An athlete is contesting the rejection of $1.28 million in foreign tax credits that triggered over $1.5 million in tax penalties.
Updated on Oct. 21, 2026 in Taxes
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Professional basketball player Ryan Rossiter has challenged an IRS decision to deny $1.28 million in foreign tax credits claimed for the 2020 and 2021 tax years. The taxpayer filed a formal petition with the U.S. Tax Court on October 13, 2026, contesting proposed tax assessments and related penalties.
Why it matters
This legal dispute highlights the complexity of documenting international tax payments for U.S. citizens working abroad. The case centers on whether the taxpayer provided adequate proof of taxes paid in Japan, a critical step for avoiding double taxation on foreign income.
The IRS is seeking $1,284,076 in additional taxes and $256,815.20 in accuracy-related penalties across the 2020 and 2021 tax years. These figures stem from the rejection of $1.28 million in foreign tax credits initially claimed by the athlete.
The players
Ryan Rossiter
A professional basketball player who competed in Japan's professional league.
IRS
The federal agency responsible for collecting taxes and enforcing tax law in the United States.
U.S. Tax Court
The federal court that hears disputes between taxpayers and the IRS before any tax is paid.
The details
The IRS rejected the foreign tax credits after evaluating the athlete's 2020 and 2021 federal tax returns, leading to proposed tax bills of $595,151 and $688,925, respectively. In addition to these amounts, the agency imposed accuracy-related penalties totaling $256,815.20 for the two-year period. Rossiter, who played for professional teams in Japan, asserts that the documentation for his foreign tax payments is sufficient to support his original claims.
Timeline
2020: The tax year for the first set of disputed foreign tax credits.
2021: The tax year for the second set of disputed foreign tax credits.
October 13, 2026: The date Ryan Rossiter filed his petition in U.S. Tax Court.
Money Landscape
This case sits within the standard framework of the Foreign Tax Credit, which allows taxpayers to offset taxes paid to foreign governments. It follows the established pattern of IRS audits focusing on the evidentiary requirements necessary to substantiate international tax payments.
This case serves as a reminder to maintain rigorous records of all taxes paid to foreign jurisdictions, as the IRS requires clear documentation to approve foreign tax credits. Consult a qualified tax professional to ensure your international income reporting meets all current substantiation requirements.
The takeaway
This dispute highlights the high evidentiary bar the IRS sets when taxpayers claim credits for taxes paid to foreign authorities. Taxpayers with international income should keep comprehensive documentation of all foreign tax filings and receipts to avoid significant back-tax assessments and penalties.
Further reading
For more on the rules regarding international income, visit our Taxes section.
Source note: This article includes information reported by Bloomberglaw.
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